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UK eyes windfall tax trouble selling loan insurance

Friday, May 11, 2012

(Reuters) - Britain stretched public finances could benefit
from a windfall of several million pounds that people selling false insurance
policies must pay tax on interest related to their remuneration.

HMRC, HMRC has published guidance on payment of tax on
interest of the payment protection insurance (PPI) of the compensation
payments, targeting higher rate taxpayers in particular.

British banks will pay an estimated £ 7 billion or more for
mis-selling of loan insurance, and were lining up these days to how much money
they set aside for the payment of claims as floods in.

HSBC (HSBA.L) said Tuesday it was an extra $ 468 million
available. Royal Bank of Scotland (RBS.L), Barclays (BARC.L) and Lloyds
(LLOY.L) also raised the amount they set aside.

The Financial Services Authority, which regulates banks, has
been encouraging investors to make a claim and said last week that lenders have
so far provided $ 3 billion pounds.

Compensation includes an amount paid as premiums and
interest on those premiums that could be earned elsewhere.

"This is the portion of interest where hundreds of
millions of pounds of potential tax windfall could come from the
government," said Chas Roy-Chowdhury, head of taxation at ACCA, an
accounting body.

"As the claims happening on an industrial scale, the
government should amend the law," Roy-Chowdhury said.

A spokesman for HMRC said there was an old rule that
interest on the compensation is taxable, adding the tax would have been due in
any case if people had put their money into alternative investments such
accounts savings.

It is not known how many people have taken PPI products with
estimates ranging from thousands to millions.(Reuters) - Britain stretched public finances could benefit
from a windfall of several million pounds that people selling false insurance
policies must pay tax on interest related to their remuneration.

HMRC, HMRC has published guidance on payment of tax on
interest of the payment protection insurance (PPI) of the compensation
payments, targeting higher rate taxpayers in particular.

British banks will pay an estimated £ 7 billion or more for
mis-selling of loan insurance, and were lining up these days to how much money
they set aside for the payment of claims as floods in.

HSBC (HSBA.L) said Tuesday it was an extra $ 468 million
available. Royal Bank of Scotland (RBS.L), Barclays (BARC.L) and Lloyds
(LLOY.L) also raised the amount they set aside.

The Financial Services Authority, which regulates banks, has
been encouraging investors to make a claim and said last week that lenders have
so far provided $ 3 billion pounds.

Compensation includes an amount paid as premiums and
interest on those premiums that could be earned elsewhere.

"This is the portion of interest where hundreds of
millions of pounds of potential tax windfall could come from the
government," said Chas Roy-Chowdhury, head of taxation at ACCA, an
accounting body.

"As the claims happening on an industrial scale, the
government should amend the law," Roy-Chowdhury said.

A spokesman for HMRC said there was an old rule that
interest on the compensation is taxable, adding the tax would have been due in
any case if people had put their money into alternative investments such
accounts savings.

It is not known how many people have taken PPI products with
estimates ranging from thousands to millions.

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